"We will act, but I think it's very important to make the point that there is no reason for this," he said.

"We pulled out of the Gaza Strip two years ago, we took down all of the settlements, we pulled out all our military personnel, we ended the military occupation and these extremists who are shooting rockets really have no positive agenda. It's just nihilism."

Psychological impact

Militants in Gaza frequently fire Qassam rockets towards southern Israel, many of which land in the town of Sderot.

Qassam rockets are frequently fired from Gaza into southern Israel

Few of the attacks cause casualties but their psychological impact on life in the area has been significant.

Attacks last week on Sderot included one that landed near a crowded day-care centre.

It led parents to pull their children out of school and brought demands for harsh retaliation.

The Israeli Prime Minister, Ehud Olmert, told the country's military to draw up plans to curb rocket attacks from within the Gaza Strip.

It stopped short of calls from some ministers to expand military operations in Gaza, or to cut Israel's supplies of water and electricity to the territory.

Tough questions

The BBC's Joe Floto in Jerusalem says the Israeli authorities will be looking urgently at two questions.

The first and most immediate is why its soldiers were housed under canvas in an area prone to this kind of attack.

The second will be much harder to address - how to prevent Palestinian militant groups from firing their rockets into Israel.

Last year the Israeli army carried out a five-month offensive inside Gaza to do just that.

Hundreds of Palestinians were killed in the operation.

After Tuesday's attack politicians and military commanders will be under intense pressure to respond forcefully, our correspondent adds.